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7–15 yr · What happens to the payment when the draw period ends?

HELOC draw and repay

Almost everything written about a HELOC is about the draw period. The part that decides whether the line was a good idea happens on one morning several years later, when the draw period ends and the payment changes shape.

Every figure this page produces is illustrative. The rate you type is an assumption, not an offer; nothing here is a quote, an application or a commitment to lend. The assumptions in force are printed at the bottom of the page.

What you are working from

What is actually outstanding on the line, not the limit you were approved for. An undrawn limit costs nothing and does nothing.

You type this. Plinth publishes no rates. On a real line this figure is an index plus a margin and it moves during the draw.

The usual arrangement, and the reason the step exists. Switch it off to model a minimum payment of one per cent of the balance instead, which pays a little principal down as you go.

Kept separate on purpose. The draw period is long enough for the index to move against you, and the step is worst when the rate has risen and the schedule starts at the same moment.

Recalculates as you type. There is no submit button and nothing is sent.

The step when the draw period ends Illustrative

$0

—

Last payment of the draw period

$0

—

First payment of the repayment period

$0

—

Balance the day the draw ends
$0
Interest paid during the draw period
$0
Interest paid during the repayment period
$0
Interest over the whole life of the line
$0
Everything paid in, start to finish
$0

The draw period ends after payment —.

The payment over the whole life of the line

One line, drawn across both periods. The vertical rule is the day the draw period ends: to the left of it you are paying interest, to the right of it you are paying interest and principal on a schedule that has to clear the balance by a fixed date.

The payment over the whole life of the line
Show these numbers as a table

The balance over the same period

Interest-only means the balance is flat for the whole draw period — every dollar of every payment has gone to the lender and none of it to the debt. The fall only starts on the right of the rule.

The balance over the same period
Show these numbers as a table

Four things that are true of every line, whatever the numbers say

  • A HELOC revolves. A home equity loan does not.

    A home equity line of credit is a revolving account secured by your home: a credit limit you draw against, repay and draw against again during the draw period. A home equity loan is the other shape entirely — one lump sum handed over at closing, on a fixed rate and a fixed schedule, with nothing left to draw. Two products, two different arguments, and only one of them has the step this page is about.

  • The rate on a HELOC is usually variable.

    Most lines are priced as an index plus a margin, and the index moves without asking you. Your agreement sets the margin, the adjustment frequency and any lifetime ceiling — those three things are the product. A line with a low starting rate and no ceiling worth the name is not a cheaper line, it is a longer bet. Read the caps before you read the rate.

  • Both sit behind the first mortgage, and both are secured by the house.

    A second lien is paid after the first out of any sale or foreclosure, which is why it is priced above the first. That ordering is about the lender’s risk, not yours: from where you sit, a HELOC and a home equity loan are both secured by the home. If the payment stops, the collateral is the place you live, exactly as it is on the first mortgage.

  • Whether the interest is deductible depends on the use, and on you.

    Deductibility of interest on home equity debt turns on what the money was spent on and on your own tax position — your filing status, your other deductions, the total debt secured by the home. That is a question for a tax adviser who can see your return. It is not a question a lender, or a page like this one, is in any position to answer, and anyone who answers it in a sales conversation is guessing on your behalf.

The assumptions in force

  • Both rates are yours, not ours. Plinth publishes no rates. The draw rate and the repayment rate are assumptions you control, and every figure on this page moves with them.
  • Each rate is held flat for its own period. A real line adjusts with its index, possibly many times, inside the caps written into your agreement. Modelling a single figure for the draw and a single figure for the repayment is the clearest way to show the step, not a forecast of where the index goes.
  • The balance is assumed drawn on day one and never drawn against again. A revolving line does not have to behave that way, and if you keep drawing, the balance at the end of the draw period — and therefore the step — is larger than this.
  • Interest-only means exactly that. With the box ticked, no principal is repaid during the draw at all. With it unticked the page models a minimum payment of one per cent of the balance a month, which is a common structure but not the only one; read your own agreement.
  • Annual fees, draw fees, early-closure fees and any appraisal are not modelled. They are real, they vary by lender, and inventing figures for them here would be worse than leaving them out.
  • Nothing here is a quote, an offer, an application or a commitment to lend, and nothing on this page is tax advice.

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